Steve Bundred, chief executive of the audit commission, joins the politicians debating where cuts will fall in public services. But the cost-cutting most needed is the one that is never talked about – that of the regime itself, the vast pyramid, hundreds of thousands strong, of people engaged in regulating, specifying, inspecting, instructing and coercing those who provide public services to comply with their edicts; Bundred's people being centre-stage.

For example, the recent Treasury report announced savings of £15bn through more "back offices". Bundred's people published their own report a few months earlier, celebrating the use of back offices, but there was no evidence in the report to support the conclusion. Interestingly, Stroud district council has no back offices yet it is achieving efficiencies that make Gershon targets seem un-ambitious. Did Bundred's people study the reasons for Stroud's success? No, the audit commission is an instrument of the regime, promoting its ideology rather than taking an active interest in what works.

The Treasury report's evidence base for more back offices is, by its own admission, based on "proxies, estimates and assumptions". It is a blind belief, shared by Bundred's people, in "economies of scale". In the private sector, economy of scale has been discovered to be a myth; indeed, the evidence is that these factory designs create massive waste through standardisation, centralisation and outsourcing (all features admired by Bundred's people).

In Stroud, the housing benefits service deals with all customers in less than a week (the target is a month) and has coped with increasing demand due to the "crunch" with no further resources. But local authorities achieving such extraordinary results (through economy of flow not scale), whether in benefits processing, housing repairs, trading standards or any other local authority service, get into trouble with Bundred's people. This is because the features the inspector has been trained to inspect for are not there.

The latest Mori survey, showing once again that services have not improved from the citizens' point of view, should be treated as a perennial signal. Oblivious to the signal, instead relying on targets and CPA reports by Bundred's people, ministers rationalise the situation, arguing that people have not noticed the "improvement", calling for better communications. Elected representatives often wonder why it is that, according to Bundred's people, their local services are rated four-star, yet their surgeries are full of people complaining. The reason for these phenomena: targets make performance worse. Mandated, they descend into our public services and distort the way work is designed and managed – ensuring people are focused upwards to the regime, not outwards to their customers. Solace has published a compelling report illustrating how targets have undermined performance in many services.

The regime has fostered compliance rather than innovation, and compliance with wrong-headed ideas to boot. Bundred's people are central to the regime. We need to rid ourselves of the specifiers, who dream up bad ideas, and inspectors who ensure compliance. It is time to make the managers who deliver the services responsible rather than compliant, an essential prerequisite for innovation.